Which Trading Method Suits Your Style

Stepping into the world of trading is a big commitment. Your investment involves both time and capital and requires ample research to get to know the markets and make a plan to ensure your success. The world of trading can be quite a roller-coaster ride, so make sure you understand the potential ups and downs before you get started.

Research will guide you through the various processes and terms. You’ll want to understand factors such as how binary trading can turn a quick profit, learn how to gauge the “weather conditions” of the market, and avoid the pitfalls of overconfidence. You’ll need to determine many factors as you work toward your goal, such as whether you want to stick closer to home with your trading or dip your toes into foreign markets.

Consider the skill sets needed to work in the fast-paced, analytical environment of trading, and think about how well you can separate your emotions from evaluating risks in order to make quick, objective decisions. Considerations such as these should take your own personality into account. What kind of person are you, and what kind of trading style best suits you?

There are numerous types of traders, so along with the other homework you’re doing, you’ll need to put some thought into the trading method that fits your personality and skills and interests you the most.

The Day Trader

As the name implies, day traders, also known as active traders, buy and sell within the same day. This is not recommended for a new trader, but if you’re the outgoing type who ‘s willing to take risks without hesitation, this is a trading style to work toward.

The Scalper

The scalper is a kind of day trader who darts in and out of numerous trades per day, skimming small profits from each trade. A little can go a long way if you add up all these small amounts. Every trader should know his or her limits and set stops along the way. Scalping requires a more refined and disciplined player who won’t be tempted to go for just a little more instead of moving on to the next trade.

The Momentum Trader

The momentum trader is someone with patience and foresight. This type of trading is for someone who will take the time to find high-volume stocks with significant upward movement and then ride that momentum to a desired profit.

The Technical Trader

If your analytical brain loves charts, diagrams, and graphs, being a technical trader may be the trading niche for you. A technical trader will follow the lines of convergence or divergence to spot the right buy-or-sell triggers.

The Fundamental Trader

The fundamental trader is in for the long haul, patiently analyzing trends based on corporate events such as reorganizations, actual versus anticipated earning reports, acquisitions, and stock splits. This is generally a long-term trading style where stocks are held for months or even years.

As an amateur trader, you may wish to play around with any or all of these techniques to find what’s right for you, but if you already know yourself to be the patient type or the highly analytical type, you may be able to settle into your niche right from the start. Either way, matching up your trading knowledge, your experience, and your skill sets with your personality will help you find the trading style that will make the most out of your venture.

Image via Flickr by AndreasPoike

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